Oil & Gas Prices - Oct 25
Posted: Mon Oct 25, 2021 9:15 am
Opening Prices:
> WTI is up $1.07 to $84.83/Bbl, and Brent is up 75c to $86.28/Bbl.
> Natural gas is up 29.8c to $5.578/MMBtu.
AEGIS Notes
Oil
For the strip for oil: The trend is UP. Buyers will remain in control above $82.50.
Brent crude rallied above $86/Bbl as Saudi Arabia urged caution in boosting supply (Bloomberg)
> The Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg TV on the weekend that producers shouldn’t take the rise in prices for granted
> WTI’s Dec21-Dec22 spread widened to $12 on Monday, while Brent’s edged closer to $10, both the strongest since 2013
> WTI’s discount to Brent moved to the smallest since July at less than $2 on Monday
> “WTI is dragging Brent higher,” said Warren Patterson, head of commodities strategy at ING Groep NV. “There are clear concerns over Cushing inventory levels, which is well reflected in the WTI prompt spread.”
MY TAKE: Putin let the "cat out of the bag" in an interview on October 21 when he said that several of the OPEC+ countries cannot produce up to their quotas. I believe that OPEC+ cannot increase production by 400,000 bpd per month (the cartel's goal) and will probably run out of spare capacity within six months.
World oil demand will hit 100 MMBbl/d shortly (Goldman Sachs)
> Gas-to-oil switching for power generation may contribute at least 1 MMBbl/d to oil consumption, with gas forwards incentivizing that through winter, according to the bank
> Goldman also noted that oil prices are not high enough to generate demand destruction given falling energy intensity in developed markets and rising income levels in emerging markets
MY TAKE: Goldman's forecast that Brent will be over $90/bbl my December is probably too low.
Natural Gas
For the strip for ngas: The trend is UP. A change in trend would require a weekly close below $5.17. Buyers are in Control above $5.10. Market-Driven hedges for producers are available at current prices.
Gas ship shortage threatens to worsen global energy crisis
> Charter rates for LNG vessels are currently at a nine-month high as U.S. exports to Asia increase
> Pacific bain LNG freight rates are at $203.5k/per day, with reports that some are asking up to $220k - $275k/per day
> Asia and Europe are competing for a shrinking pool of spot LNG cargoes as utilities try and refill inventories before winter
MY TAKE: We ain't seen nothing yet. The "Mother of all Bidding Wars" will get a lot more serious when the first winter cold waves hit Europe.
Freeport LNG to reduce loadings due to pipeline maintenance
> North to south capacity on a segment of Boardwalk Pipeline Partners’ Gulf South pipeline will cut flows by up to 650 MMcf/d during the work that will occur from Oct. 26 to Nov. 9, according to a notice
> Freeport LNG has the option to get gas from other pipelines, including Enbridge’s Texas Eastern Transmission Gas Pipeline, making it unclear how many loadings will be affected
> WTI is up $1.07 to $84.83/Bbl, and Brent is up 75c to $86.28/Bbl.
> Natural gas is up 29.8c to $5.578/MMBtu.
AEGIS Notes
Oil
For the strip for oil: The trend is UP. Buyers will remain in control above $82.50.
Brent crude rallied above $86/Bbl as Saudi Arabia urged caution in boosting supply (Bloomberg)
> The Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg TV on the weekend that producers shouldn’t take the rise in prices for granted
> WTI’s Dec21-Dec22 spread widened to $12 on Monday, while Brent’s edged closer to $10, both the strongest since 2013
> WTI’s discount to Brent moved to the smallest since July at less than $2 on Monday
> “WTI is dragging Brent higher,” said Warren Patterson, head of commodities strategy at ING Groep NV. “There are clear concerns over Cushing inventory levels, which is well reflected in the WTI prompt spread.”
MY TAKE: Putin let the "cat out of the bag" in an interview on October 21 when he said that several of the OPEC+ countries cannot produce up to their quotas. I believe that OPEC+ cannot increase production by 400,000 bpd per month (the cartel's goal) and will probably run out of spare capacity within six months.
World oil demand will hit 100 MMBbl/d shortly (Goldman Sachs)
> Gas-to-oil switching for power generation may contribute at least 1 MMBbl/d to oil consumption, with gas forwards incentivizing that through winter, according to the bank
> Goldman also noted that oil prices are not high enough to generate demand destruction given falling energy intensity in developed markets and rising income levels in emerging markets
MY TAKE: Goldman's forecast that Brent will be over $90/bbl my December is probably too low.
Natural Gas
For the strip for ngas: The trend is UP. A change in trend would require a weekly close below $5.17. Buyers are in Control above $5.10. Market-Driven hedges for producers are available at current prices.
Gas ship shortage threatens to worsen global energy crisis
> Charter rates for LNG vessels are currently at a nine-month high as U.S. exports to Asia increase
> Pacific bain LNG freight rates are at $203.5k/per day, with reports that some are asking up to $220k - $275k/per day
> Asia and Europe are competing for a shrinking pool of spot LNG cargoes as utilities try and refill inventories before winter
MY TAKE: We ain't seen nothing yet. The "Mother of all Bidding Wars" will get a lot more serious when the first winter cold waves hit Europe.
Freeport LNG to reduce loadings due to pipeline maintenance
> North to south capacity on a segment of Boardwalk Pipeline Partners’ Gulf South pipeline will cut flows by up to 650 MMcf/d during the work that will occur from Oct. 26 to Nov. 9, according to a notice
> Freeport LNG has the option to get gas from other pipelines, including Enbridge’s Texas Eastern Transmission Gas Pipeline, making it unclear how many loadings will be affected